by James Grant
Since the previous July there had been reports that Baruch was to become Postmaster General, American Reparations Commissioner, and Secretary of Commerce. He had already turned down the Treasury portfolio in 1918. But, as he told the story, the second Treasury invitation tempted him, and he went home to try out the idea on his wife. Annie, however, asked him to come back to her and to their children (by then grown or nearly grown); which, he said, he did, although he had never been a homebody even in private life.
He did, however, stay in the thick of the treaty fight. He did the predictable thing of helping to finance the activities of the League to Enforce Peace, a pro-treaty organization, but he also did the unexpected. Early in 1920, as the Senate was preparing to vote on ratification for the third time, a book was published by John Maynard Keynes, the thwarted British adviser in Paris. The Economic Consequences of the Peace was a rich polemic that instantly turned sentiment against Wilson and the League of Nations. Wilson was, to Keynes, a “blind and deaf Don Quixote,” and a “Nonconformist minister,” whose mind was addled and whose very hands lacked “sensitiveness and finesse.” His capitulation to the sophistry of the Smuts line on reparations had stripped him of his moral authority. When, near the end of the conference, Lloyd George, the British Prime Minister, suddenly urged moderation toward Germany, “he could not in five days persuade the President of error in what it had taken five months to prove to him to be just and right. After all, it was harder to de-bamboozle this old Presbyterian than it had been to bamboozle him; for the former involved his belief in and respect for himself.”
Senator William Borah, one of the treaty’s bitter-end foes, delightedly quoted from the book, and the Senate, shortly after its publication, again, and for the last time, failed to ratify. Appalled by the events in the Senate and convinced that Keynes had been a cause of them, Baruch set out to put the record straight with a book of his own. The drawback of his not being a writer was surmounted with $10,000. For that stipend John Foster Dulles agreed to become his principal ghostwriter. The result, in the fall of 1920, was a brief and austerely titled volume, The Making of the Reparation and Economic Sections of the Treaty.
At first glance the putative author himself seemed to have had nothing to do with the project. The prose was someone else’s, and there were uncharacteristically few allusions to his own career and accomplishments. On closer inspection, however, the book bore a deep Baruch mark. For one thing, there were plenty of facts and documents and also a scene-setting chapter about the “human element” (a favorite phrase of Baruch’s) in Paris. The point of that chapter was that wartime emotion so infected the peacemaking that compromise was inevitable, and that, in the circumstances, the Americans did about as well as they could. The narrative was detached, impersonal, and, at its best, wise. Although he despised Keynes for his thrust at Wilson, Baruch never named “one of the foremost critics of the treaty and of the President’s position on it,” or stooped to the ad hominem argument. (Years later, Baruch wrote, with some justice, “Somebody said that ‘Kaynes [sic] wrote the most interesting book devoid of facts and Baruch wrote the dullest book full of facts.’ ”) In his book, Keynes had praised the President’s advisers, but Baruch refused to be flattered, and he stood by Wilson devotedly. A case in point was the pension matter. Along with Keynes, Baruch had opposed the view that pension costs should be folded into the reparations pot. But since the President had chosen to compromise on the question, Baruch loyally put down his own abandoned position as “possibly legalistic.” “One must be either ignorant, vicious, or an impractical idealist,” wrote Baruch, permitting himself some spleen, “to contend that in the foregoing circumstances it was humanly possible to have found at the Peace Conference a sound, definite solution of the German reparation problem which would have met with ratification.” Yet that, of course, was just what he had worked for.
The book was published to a friendly reception on the eve of the 1920 presidential election. The Nation hailed it as “an invaluable contribution.” Alvin Johnson, a former WIB man, took his former chief to task in The New Republic for naïveté on the prospects for a workable reparations outcome, but declared that he had “triumphantly vindicated” the American side in Paris. The Spectator of London, describing Baruch as “one of the most impartial men at the Peace Conference,” called his book “. . . short and concise, but it is in some respects the most illuminating comment upon the Treaty that we have yet seen.”
Among the respectful critics was, unexpectedly, John Maynard Keynes. In The Manchester Guardian (and, in New York, in The Literary Review of the New York Evening Post), he raised an eyebrow at the book’s use of what he took to be secret documents, expressed his doubts concerning the Reparations Commission and became gently patronizing in the matter of style. (“If it were written with more art, it would tell less. It powerfully illumines history, and reveals the secret springs of human nature. . . . I wonder if Mr. Baruch is always aware of how much he here discloses.”) But he acknowledged the “considerable” part that Baruch had played in Paris and praised his book for its sincerity and truth telling. What Keynes saw brilliantly in his review was that the “human element” thesis of The Making of the Reparation and Economic Sections of the Treaty was no mere view of the Peace Conference. It was, in fact, a key to Baruch’s outlook on the world. A passage in Baruch’s book—“Though the peace delegates individually were able and high-minded, they were bound to the wheel of their national aspirations”—had caught Keynes’s eye, and he urged the reader to study it. He wrote:
It is a central doctrine of Mr. Baruch’s philosophy of life that “able and high-minded” persons can, through force of circumstances, become the instruments of misguided and disastrous passions without ceasing to be able and high-minded. Indeed, it may be proof of their ability and high-mindedness that they should so acquiesce, because it may give them an opportunity unobtrusively to moderate their passions.
Baruch did believe essentially that. In the stock market he had learned to cut his losses. So in public life he was usually careful not to cling to a doomed position for the sake of honor or principle. In Paris, again to quote Keynes, he held certain high views which he “did his best to uphold . . . (though not to the death).” A tribute to Baruch’s capacity for friendship is the rapport he could feel for a very different kind of man. He continued to see Woodrow Wilson, who, in the end, willingly did go down with the ship. In 1923, a few months before Wilson’s death, the two men were talking. Wilson had laid his paralyzed arm on the table beside him, and said deliberately:
Perhaps it was providential that I was stricken down when I was. Had I kept my health I should have carried the League. Events have shown that the world was not ready for it. It would have been a failure. Countries like France and Italy are unsympathetic with such an organization. Time and sinister happenings may eventually convince them that some such scheme is required. It may not be my scheme. It may be some other. I see now, however, that my plan was premature. The world was not ripe for it.
The pathos of this tied Baruch’s tongue. “Well, Mr. Wilson, you did what you thought was for the best!” he said, and regretted not saying more.
34. There is some confusion about who owed what to whom. Chandler P. Anderson, a Republican lawyer, was under the impression that Wilson had borrowed $150,000 from Baruch to defray various ceremonial expenses in Europe until Congress could authorize payment from the Treasury. If so, the $150,000 for Baruch might have been nothing more than a discharge of the presidential debt. Baruch himself reported that he had spent only $24,128.64 of the allotted $150,000 and none of it on his personal expenses.
35. He could also be indirect, as Cecil testified in his diary. Baruch and he had been talking about economic aid to Europe, but Baruch had spoken mainly about himself. Cecil wrote: “There was a long passage about his methods of doing business, which at the time I thought merely one of his usual irrelevancies, but from what I have heard subsequently I think he intended it to be a kind
of indication of the way in which he thought the economic problems of Europe should be dealt with.”
36. Krock took more pleasure in telling this story than Baruch did in listening to it. After Krock had delivered it, or a variation, at Hobcaw one evening, Baruch piped up, “Arthur, you’re a dirty liar.”
Eleven
Farming, Money, McAdoo
Just before his forty-ninth birthday in the summer of 1919, Baruch took the opportunity of a visit to the White House to discuss his future plans. He tackled the subject by indirection, telling a man from the Chicago Tribune what he was not going to do:
I’m through with politics of any sort for good and all. I am through with public life and will assume no occupation which would give anyone the opportunity to say that I was taking advantage of secrets learned while head of the War Industries Board and in charge of war purchases for the Allies.
No, sir, I am not going to give a living soul the opportunity to say that I have profited even in the most remote way because of my war service. The patriotic joy of helping to lick the Huns was reward enough for me.
[He was emphatic about not returning to Wall Street.]
Never again. I was a gambler once, and for many years was a member of the New York Stock Exchange, but I am through.
What exactly Baruch did plan to do with himself was a mystery. That October, at the President’s request, he chaired a conference on labor strife, of which the country at the time had too much and from which it continued to suffer after the conference adjourned. Early in 1920 came reports that he was financing a McAdoo-for-President drive, which he denied (the candidate himself denied his candidacy, which, in the event, went nowhere). A Republican congressman accused him of stealing $50 million “in copper alone” from the government in the war. Baruch denied that, and he denied reports that he was secretly running the White House in place of the stricken Wilson. At the same time, Henry Ford’s newspaper, the wildly anti-Semitic Dearborn Independent, accused him of being the “pro-consul of Judah in America” and a “Jew of Super-Power.” Sought out by reporters for comment on the charges, Baruch replied as genially as he could, “Now, boys, you wouldn’t expect me to deny them, would you?”
What his enemies might not have imagined was that Baruch at the time was financially depleted. In 1916, his net income had topped $2 million. In the first wartime year of 1917 it amounted to $695,137.57. By 1919 it had fallen to $37,745.34. Not only had he earned less while spending large sums on government business but also he was reduced in capital. Before the war, as a precaution against the appearance of a conflict of interest, he had sold most of his marketable stocks and bought bonds. A list of his holdings, apparently incomplete, for the war period, shows $5.3 million of Liberty Bonds, and more than $1 million each of railroad and tax-exempt securities. (Baruch also liked to keep a lot of cash on hand, which wouldn’t have turned up in his bond inventory.) In step with the wartime inflation, however, interest rates had gone up; as rates rose, bond prices fell. In the spring of 1920, when rates made their highs and bond prices their lows, Baruch’s losses on paper were sizable. At that moment his fortune probably amounted to little more than $10 million, down from approximately $15 million in 1916. As late as the fall of 1921 he excused himself from making a charitable contribution with the rich man’s exaggeration: “I am broke.”
It was just at this financial nadir when he came under Ford’s attack and when Arthur Krock rose to his defense. Krock, who went home to Louisville to resume duties on the Courier-Journal and the Louisville Times, had written a pro-Baruch editorial in May 1920. Baruch answered with a warm and (in the circumstances) optimistic letter:
I “cottoned” to you the first time I saw you [he told the young man]. It is very difficult for me to tell you how much I appreciated your generous editorial about me. My regard and affection is not lightly bestowed; nor can it be easily removed. I have been through some very severe schools—that of finance and industry, in Wall Street, that of politics, the war and the Peace Conference, and I must say that as I near my fiftieth birthday, which will be in August, that my faith in human nature and my fellow men has been increased.
Another vote of confidence came in the mail that summer. Out of the blue the Kansas State Board of Agriculture asked him to investigate the marketing dilemma of wheat farmers. It was a challenging moment for consulting: a twenty-year period of farm prosperity was ending, business was slumping, and the stock market was falling. In the war farmers had planted fence to fence and borrowed to the eyes. Then came peace, a deflation, and the shrinking of foreign markets. Land and commodity prices fell and the burden of debt became oppressive. Baruch was unversed in practical farming, but (as the Kansans knew) was thoroughly grounded in the overall economy. His father, who had just turned eighty, had been an amateur agronomist. Delighted by the invitation, he set out for Kansas late in August or early in September.
His visit began at the statehouse in Topeka with a mortification. Meaning well, an official on the greeting committee introduced him to his agricultural audience as the “Wolf of Wall Street.” The Wolf of Wall Street was in fact David Lamar, the criminal.
Collecting himself, Baruch told his hosts that he would get the facts of the matter and then dispense advice. So far as speculation was concerned, he said, “I was not in any combinations on the market. I played a lone hand, and was just about as popular with Wall Street as I judge Wall Street is with you.” For the next week or so he talked to local farmers, grain dealers, bankers, merchants, and newspaper editors. He returned to New York, digested what he had heard, and wrote to the last Secretary of Agriculture in the Wilson Administration, E. T. Meredith, for more information. (Baruch acknowledged receipt of the Secretary’s reply with a politically heady thank-you note: “You can depend on my doing anything that it possible for me to do at the next session of Congress.” So much for his boycott of politics.) He pulled together his material and submitted a seventeen-page report a month after the Republican landslide.
Baruch was a believer in the interdependence of world markets, and the report proceeded from the view that prosperity for American farmers depended on the restoration of international trade. The first order of business was therefore to settle accounts with Germany. The next was to build more warehouses and grain elevators so that producers could withhold crops in bad markets and thus bargain on a more even footing with consumers. Private capital should finance that construction if possible, said Baruch, but public funds should be used if necessary. He added that investors might lend to farmers on the collateral of crops in storage. (Although the grain futures markets served precisely the purpose of shifting financial risk from farmers and middlemen to speculators, Baruch, the former professional speculator, made no mention of them.) Despite an occasional populist note—for example, that a “fair share” of the nation’s credit should be allocated to agriculture—the report was basically a conservative document. “In closing,” Baruch wrote, “let me say that in working for a solution to this most important matter, we shall not find it in Aladdin’s lamp or in any form of legerdemain. The only legislation needed will be that which grants the farmer an equal opportunity by opening wide all avenues of marketing, and for cooperative effort.”
Reprinted as a pamphlet under the title “Putting Farming on a Modern Business Basis,” the report established Baruch as a man with something to say about cooperative farming. Aaron Sapiro, a young California lawyer in the van of the co-op movement, commended him, and the United States Grain Growers offered him a job (which he declined).[37] He spread his agricultural energies in various directions: in Kentucky by helping to found a tobacco co-op (he was assisted by Krock’s boss, Robert W. Bingham, publisher of the Louisville Times and the Courier-Journal); in South Carolina by subscribing $500,000 to a state cotton finance scheme and by putting up hundreds of thousands more to help shore up country banks that had lent on the collateral of then-depressed farmland; and in the Midwest by almost, but not quite, bringing off the sale of
the Armour Grain Company to farm groups. When Congress in 1923 passed a bill to establish the Intermediate Credit Banks in order to foster commercial bank lending to agriculture, Gray Silver, chief Washington lobbyist of the American Farm Bureau, wrote Baruch appreciatively. He said that the legislation was nothing that Baruch hadn’t talked about in 1920. To toast the new banks, Baruch bought $1.1 million worth of their brand-new notes.
He made another investment sheerly out of agrarian sentiment, some $50,000 worth of the bonds of the state of North Dakota. When he bought, the ruling power of the state was the Nonpartisan League, which preached public ownership and deliverance from Wall Street. In 1919 it set out to build a state bank and a state grain company. A $17 million bond issue was planned to finance those projects, but a taxpayers’ organization, maintaining that the state was overreaching itself, filed suit to block the bond issue. At last in 1921 the bonds made their way to market. Wall Street was unreceptive, but Baruch, wishing the League well, bought a bit of the deal for himself.
Baruch was genuinely sympathetic to farmers, would support the occasional eccentric scheme merely because it was agricultural, but ran hot and cold on the most far-reaching farm proposal of the 1920s, the so-called McNary-Haugen Bill for farm equality. The basis of the plan was the unequal working of the tariff. Whereas manufacturers sold in a market that was protected from foreign competition, farmers had to take the unprotected world price for their crops. The McNary-Haugen solution was to broaden the tariff. First the government would decide whether the surplus portion of a given crop, say wheat, had unduly depressed the price of the whole crop. If so, the surplus would be swept up and sold abroad for what it would bring. The price of wheat would rise in the American market; the higher price would be protected by a tariff. The government would do the foreign marketing, but the farmers would finance the program via a special “equalization” tax. From the farmers’ point of view, it was thought that the benefits would outweigh the costs.